Working Paper

No. 2015-1

The Impact of Democracy in Inequality, Poverty

and Development

Paulo Roberto Gitirana de Araujo Guerra

June 2015
 ISSN 2213-6614

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2
Contents

List of Tables .................................................................................. 4

List of Figures ................................................................................. 5
Abstract ........................................................................................... 6
Chapter 1 - Introduction ..................................................................... 7
Chapter 2 – Methodology, Indicators and databases ........................ 9
Gini Index ......................................................................................10
Polity IV .........................................................................................10
Indices of Social Development ...................................................... 11
Civic Activism............................................................................................11
Intergroup Cohesion ................................................................................12
Interpersonal Safety and Trust ................................................................13
Inclusion of Minorities .............................................................................15
Chapter 3 - Understanding Democracy ............................................16
Understanding the dynamics of elections .....................................19
The Impact of Free Market Ideology in Democracy ................... 23
Democracy beyond elections........................................................ 25
Participatory Democracy .............................................................. 26
Intergroup Dialogue as an essential element of Participatory
Democracy ........................................................................................... 28
Chapter 4 - Understanding Inequality ..............................................31
Inequality, poverty and development ........................................... 33
Chapter 5 - Relating participation and inequality............................ 36
Chapter 6 - Conclusion ..................................................................... 47
References..................................................................................... 49

3
List of Tables
Table 1 - Summary statistics for all the variables...................................................36
Table 2 - Regression Gini Index and Polity IV_Democracy ...............................36
Table 3 – Regression Gini Index and Civic activism ............................................37
Table 4 – Regression Gini Index and Intergroup Cohesion ................................37
Table 5 – Multiple Regression Gini Index, Intergroup Cohesion, Civic activism
.......................................................................................................................................38
Table 6 - Regression Gini Index and Inclusion of Minorities .............................39
Table 7 – Multiple Regression Gini Index, Intergroup Cohesion, Civic activism,
Inclusion of Minorities ..............................................................................................39
Table 8 – Multiple Regression Gini Index, Intergroup Cohesion, Inclusion of
Minorities.....................................................................................................................40
Table 9 – Multiple Regression Gini Index, Civic activism, Inclusion of Minorities
.......................................................................................................................................40
Table 10 – Multiple Regression Gini Index, Interpersonal Safety and Trust ....41
Table 11 – Multiple Regression Gini Index, Civic activism, Intergroup Cohesion,
Interpersonal Safety and Trust and Inclusion of Minorities ................................41
Table 12 – Multiple Regression Gini Index, Civic activism, Intergroup Cohesion,
Interpersonal Safety and Trust, Inclusion of Minorities, Polity IV - Democracy
.......................................................................................................................................43
Table 13 – Multiple Regression Gini Index, Civic activism, Intergroup Cohesion,
Interpersonal Safety and Trust, Inclusion of Minorities, Polity IV – Autocracy
.......................................................................................................................................44
Table 14 – Multiple Regression Gini Index, Civic activism, Polity IV-Democracy
.......................................................................................................................................45

4
 List of Figures
Figure 1 – Internal dynamics of security.................................................................14
Figure 2 – Social interaction of distrust ..................................................................14
Figure 3 - Paradox of voting .....................................................................................21
Figure 4 – Impact of polarization in inequality......................................................24

5
Abstract
Development and Democracy are two of the most famous and defended values
in the International Relations. However, none of those concepts is easy to define
and comprehend. Even more difficult is understand the impact that one has over
the other. This work aim to understand and describe the impact that democracy
has over development. Here we understand that the main objective of develop-
ment is to reduce poverty. In order to compare democracy and development,
we make a differentiation between Formal Democracy, based on civil liberties
and political rights and mostly restricted to elections and representation in the
decision making process; to Participatory Democracy, based on active Civic ac-
tivism and focused in direct participation in the decision making process.

Relevance to Development Studies

Most of the defenders of development see poverty as a problem to be solved.
Nonetheless, poverty is a very complex phenomena and even the way it is meas-
ured can make the task to solve this social problem very hard and ungrateful.
Income Inequality in itself is easier to measure and despite of not being neces-
sarily the same or a complete concept keeps a straight relationship with poverty.
What we argue in this work is that Formal Democracy is incapable of solving
the problem of inequality. But by promoting Participatory Democracy and its
elements, mainly Interpersonal Dialogue, a development practitioner can foster
equality in between safety parameters and by doing this it will be able to reduce
poverty and promote development. However, this Interpersonal Dialogue must
have some characteristics.

Keywords
Development, Poverty, Inequality, Democracy, Political Science, Welfare Eco-
nomics

6
Chapter 1 - Introduction

In order to defend the war in Iraq, George W. Bush said:

“America is a Nation with a mission - and that mission comes from our most
basic beliefs. We have no desire to dominate, no ambitions of empire. Our aim
is a democratic peace - a peace founded upon the dignity and rights of every
man and woman.”(George W. Bush)
About the same Iraq war, Bashar Assad, president of Syria, said:
“For two years, the Iraqi people have suffered from the aftermath of a horrific
war and occupation by America. The world is beginning to speak with one
voice. We want that democracy in Iraq to succeed, and we know it cannot suc-
ceed so long as she is occupied by a foreign power and that power is America.”
(Bashar Assad)
When talking about Syria, Shimon Peres, president of Israel, argued:
“My heart goes out to the brave citizens of Syria, who each day risk and even
sacrifice their lives to achieve freedom from a murderous regime. We in Israel
welcome the historic struggle to forge democratic, peace-loving governments
in our region.” (Shimon Peres)
When talking about Israel, Ismail Haniyeh, prime minister of the Palestinian
National Authority, states:
“In addition to removing our democratically elected government, Israel wants
to sow dissent among Palestinians by claiming that there is a serious leadership
rivalry among us. I am compelled to dispel this notion definitively.” (Ismail
Haniyeh)
As the aforementioned quotes demonstrate democracy is a very ambiguous
term and this ambiguity generates a scenario in which the expression is used to
define any kind of action.
How is it possible that a concept accept so contradictory perspectives? What
kind of concept accept that opponents defend the “same thing” even when act-
ing in very diverse and some times contradictory way? Schmitter and Karl ex-
plain it:
“Politicians with a wide range of convictions and practices strove to appropri-
ate the label and attach it to their actions.”(Schmitter and Karl 1991:75)
If in the political arena it would be possible to suspect that politicians ap-
propriate the term democracy with secondary intentions, this should not happen
in the academic arena, where the definition of the concept should be precise.
However, it is possible to see some hesitation in the use of the concept in
the literature. The reason for such hesitation is that many scholars believe de-
mocracy is a too ambiguous concept. In order to do a proper examination of the
effects of democracy in poverty alleviation, it is very important to understand
precisely what we mean by “democracy”. Are we talking about elections, about
popular participation in direct terms, in representative democracy, in Marxist
Democracy? It is important to understand what those democracies have in com-
mon and in which points they differ.

7
 “Considered as an actually existing or real-world entity, democracy has been
variously conceived of as a distinctive set of political institutions and practices,
a particular body of rights, a social and economic order, a system that ensures
certain desirable results, or a unique process of making collective and binding
decisions.”(Dahl 1989:5)
Dahl summarizes in this passage many concepts of democracy that are very
often used in separated ways. Within this context, Dahl definition is useful to
give us a broad idea about the issues that democracy encompass, but not enough
to our wish to settle its relationship with poverty and inequality. The problem
with the concept is that it cannot precisely define what is the distinctive set of
political institutions and practices, what is the particular body of rights, what is
the social and economic order, what is the system that ensures certain desirable
results, what are those results and what is the unique process of making collec-
tive and binding decisions. In other words it is necessary to go deeper. The sub-
jective of its part make the whole concept subjective and this subjective inter-
feres in our ability to compare the influence of democracy in inequality.
In this work, I will try to understand the concepts of democracy and its
mechanisms. I will try to understand the mechanisms through which democracy
can impact inequality. Neither developing a better concept of Democracy nor
developing a better concept of inequality is part of this work’s objectives. The
data and methodology we will use are insufficient to fulfill this mission. Because
I am dealing in multiple complex social environments, the data can indicate di-
rections, but are incapable to determine all the possible mechanisms through
which democracy impact inequality.
This work is divided in six chapters. The first chapter is the introduction
where I illustrate the ambiguity generated by the lack of specification in the con-
cepts of democracy, I present the boundaries of this study and I describe the
parts of study.
In the second chapter, I will present the methodology, indicators and data-
base used in this study.
In the third chapter, I will explore the concept of democracy, showing the
differences between Formal Democracy and Participatory Democracy. I will also
explore the mechanisms behind elections and how they can fail to properly in-
terpret social demands, in the end of this chapter we will evolve to a concept of
democracy that is less representative and more participatory and I will debate
the importance of intergroup dialogue to a proper Participatory Democracy.
Once we have gain more familiarity with the concepts of democracy that
will be used in this work, I will explore, in the fourth chapter, the concept of
inequality and its relationship with poverty and development.
In chapter five, I will use regression analysis to investigate the relationship
between democracy (the different kinds) and inequality.
Finally, the last chapter will summarize all the conclusions of this work.

8
Chapter 2 – Methodology, Indicators and
databases

The methodology of this study can be divided in two parts. The first part is
qualitative analysis in which I will explore the concepts of democracy, inequality,
poverty, development, intergroup dialogue, among others. I will also use quali-
tative analysis to identify social dynamics, mainly when speaking about psycho-
logical perception of social environment and when understanding the impacts
of different characteristics of electoral systems.
The second part of the methodology is regression analysis. I will use the
ordinary least square (OLS) technique to estimate the relationship between the
variables I will present above. Simple Linear Regression and Multiple Linear Re-
gression are widespread econometric techniques. Multiple Linear Regression has
the advantage of controlling the change of one variable keeping the other varia-
bles constant. This characteristic gives us important elements for analysis, for
example relative sizes of the coefficients, biggest drivers of the differences that
occur in the dependent variable. It is important to notice that I am not intending
to find a casual relationship, my intention is only to create a great descriptive
model with great predictions. Therefore, this method will be used to explore the
correlation between democracy, its elements and inequality. This work will use
the following indicators in the analysis:
 Gini Index (The World Bank. 2013);

 Polity IV democracy index (Center for Systemic Peace. 2011);

 Civic Activism (International Institute of Social Studies. 2010);

 Intergroup cohesion (International Institute of Social Studies. 2010);

 Interpersonal trust and safety (International Institute of Social Studies.

2010);

 Inclusion of Minorities (International Institute of Social Studies. 2010)

I have chosen the Gini Index and the Polity IV indicators because they are
the most used indicators when analyzing Income Inequality and Formal Democ-
racy respectively. Moreover, they are able to capture important structural ele-
ments. The Gini Index is some times criticized because it focus in income and
this doesn’t necessarily means vulnerability. However, I don’t consider this ar-
gument in this work, because I consider income an important element for mak-
ing people independent.
I have chosen the Indices of Social Development hosted by the Interna-
tional Institute of Social Studies because it has information since 1990; it encom-
passes social indicators from reputable data sources; and those indicators en-
compass almost every country in the world. Because I am trying to understand
the relationship between communities (as a whole) and their institutions, I am
not using the Gender Equality and Clubs and Associations Indicators. I chose

9
to exclude those indicators, because I believe they bring very specific perspec-
tives what could threat a more holistic perspective of the community.
Once the indicators are defined, it is important to better understand them
and how they relate to inequality and democracy. I am not adding any other
indicator of social development, because I didn’t find any other that can give me
the same quality of information without generating redundancy.

Gini Index
The Gini Index is one of the most used indicators of inequality. The World
Bank defines the Gini Index as:
“Gini index measures the extent to which the distribution of income or con-
sumption expenditure among individuals or households within an economy
deviates from a perfectly equal distribution. A Lorenz curve plots the cumula-
tive percentages of total income received against the cumulative number of
recipients, starting with the poorest individual or household. The Gini index
measures the area between the Lorenz curve and a hypothetical line of absolute
equality, expressed as a percentage of the maximum area under the line. Thus
a Gini index of 0 represents perfect equality, while an index of 100 implies
perfect inequality.” (The World Bank. 2013)
The Gini Index exempts further comments. But it is important to highlight
why we chose the Gini Index. As we going to see later, inequality is not a prob-
lem in itself, however, inequality and poverty have a very closer relationship. It
is worldwide recognized that high levels of inequality condemn people to pov-
erty and that on its turn condemns deprive people ability to choose, therefore
interfering in their freedom. The World Bank defines poverty as:
“At its most general level, poverty is the absence of acceptable choices across
a broad range of important life decisions—a severe lack of freedom to be or to
do what one wants.”(Foster et al. 2013:1)
Amartya Sen, also corroborates this understanding:
“Poverty can be sensibly identified in terms of capacity deprivation” (Sen
1999:87)
The Gini Index allows us to understand how poverty is spread. This hap-
pens because “inequality and poverty often move together” (Foster et al. 2013:3)
Moreover, “to measure and to understand the many dimensions of income pov-
erty, one must have a clear understanding of income standards and inequality
measures”. (Foster et al. 2013:3) And as aforementioned the Gini Index is the
most used measure of income inequality.
The data set of the Gini Index take into consideration every country in the
world, from under developed countries to developed countries passing through
the developing countries. In total, the Gini Index we are going to use captures
information from 149 countries.

Polity IV
The Polity IV database is very used in Political Science’s researches. In this
work we will use only two of the many scales in this database: the autocracy scale
and the democracy scale. The Polity IV Project codes “authority characteristics
10
of states in the world system for purposes of comparative, quantitative analysis.”
(Center for Systemic Peace. 2011)
I consider it an important tool, because it “covers all major, independent
states in the global system and because it is a living data collection that constantly
monitors regime changes in all major countries and provides annual assessments
of regime authority characteristics, changes and data updates.” In summary, the
Polity IV is a very trustable measure of Formal Democracy.
Together with the Gini Index, the Polity IV database is the core of this
work to measure the relationship between Formal Democracy and Income Ine-
quality. While the Gini Index will be the measure responsible for giving us quan-
titative information about Income Inequality, the Polity IV will give us quantita-
tive information about Democracy.
Polity IV captures data from 194 countries from underdeveloped to devel-
oped countries. The data set brings information from 1800 to 2013.

Indices of Social Development

The Indices of Social Development is compiled by the International Insti-
tute of Social Studies and encompass 6 indicators: Civic activism, Clubs and As-
sociations, Intergroup Cohesion, Interpersonal Safety and Trust, Gender Equal-
ity, Inclusion of Minorities. Those indicators are evaluated every five years from
1990 to 2010 in 209 countries, from developing and developed words. We will
use in this work 4 out of the 6 indicators: civic activism, intergroup cohesion,
interpersonal trust and safety and minorities inclusion.

Civic Activism
One of the initial hypothesis of this work is that civic activism should col-
laborate to a more equal community. However, this depends on how one inter-
prets the concept of civic activism. Therefore, it is necessary to better understand
what the indicator of civic activism represents. When looking at the descriptions
of the indicators, we find:
“Civic activism refers to the social norms, organizations, and practices which
facilitate greater citizen involvement in public policies and decisions. These in-
clude access to civic associations, participation in the media, and the means to
participate in civic activities such as nonviolent demonstration or petition. Civic
activism is essential in ensuring that public institutions function in an account-
able and transparent manner, with participation and representation for
all.”(International Institute of Social Studies. 2010)
This concept affirms the importance of civic activism in ensure a better
functioning of public institutions.
Here is an important point. Institutions functioning well don’t necessarily
mean they are working for decreasing inequality, because decreasing inequality
is a political decision. Therefore, if the government doesn’t have decreasing in-
equality as a goal, it will not be necessarily ensured through the institutions’
working process.
One of the reasons why this happens is because there is not a consensus
that inequality is bad in itself. As we will see in the session about inequality, some

11
scholars see inequality as something good. This way, if civic activism is measur-
ing the quality of the norms, organizations and practices, it will reduce inequality
only if this was defined as a governmental or state priority.
Moreover, many of the indicators that compose the civic activism indicator
are based in the access and availability of newspapers, TV and radio. The role of
the media is another complicated issue. While the majority of the scholars defend
that without free media there is not democracy, the relation between media and
inequality reduction is not so clear. De Jesus and van Staveren highlight that
“independent media has only limited effects on social accountability mecha-
nisms such as rule of law, government effectiveness, and social expenditures,
and press freedom has almost no effect on social accountability service deliv-
ery.”(De Jesus and van Staveren 2014:35)
Some authors, mostly followers of Marks and Foucault, would say those
media are used to ensure the status quo. And this way civic activism based in the
role of media would positively influence inequality. Going through this way we
will need to discuss democratization of the media, what is a very interesting
theme, but that goes beyond the scope of this work.

Intergroup Cohesion
In the literature, the intergroup cohesion can happen in multiple levels, it
can happen to improve poor’s life (top-down cohesion) or it can occur in an
ascendant manner to, for example, reduce tax and government dependency.
Schoem explains the dynamic of the top-down cohesion:
“Within the intergroup dialogue, participants confront the core structural is-
sues facing American democracy. They must revisit the social and personal in-
justices visited upon its citizens from past and present. They must examine how
communities of difference will live and work together, and they must identify
the places of common heritage and interests.”(Schoem 2003:216)
Acemoglu et al explain the dynamics that can generate a bottom-up cohe-
sion:
“When rates of social mobility are high and tax policy is sticky, people who are
poor today may not support high rates of taxation and redistribution because
they worry that it will negatively impact them should they become rich in the
future.”(Acemoglu et al. 2013:8)
Those perspectives suggests that social beliefs, created normally through
intergroup cohesion, can “lead to multiple equilibrium, some with low inequality
and a lot of redistribution, and others with high inequality and little redistribu-
tion” (Piketty (1995) as cited in Acemoglu et al. 2013:8)
This can be exactly the reason why some countries, Costa Rica for instance,
have experienced an increment in intergroup cohesion and at the same time an
increasing in inequality. If this thesis is right, Costa Rica might has passed
through bottom-up intergroup cohesion, while other countries from Latin
America, such as Brazil, Argentina and Ecuador, might have passed through a
top-down intergroup cohesion.
In any case, the question still exists: Is intergroup cohesion necessary and
enough to ensure inequality reduction?

12
 In order to answer this question, firstly it is necessary to understand what is
intergroup cohesion. Initially intergroup cohesion can be confused with homo-
geneity. But this is exactly the opposite of the meaning the indicator shows.
“Intergroup cohesion refers to relations of cooperation and respect between
identity groups in a society. Where this cooperation breaks down, there is the
potential for conflictual acts such as ethnically or religiously motivated killing,
targeted assassination and kidnapping, acts of terror such as public bombings
or shootings, or riots involving grievous bodily harm to citizens, with concom-
itant effects upon growth and development.”(International Institute of Social
Studies. 2010)
Cooperation and respect can only be achieved in a sustainable way when
the relationships are based in dialogue. I highlight the importance of sustainable
constructions, because it is possible that, for a period of time, one government
ensure for some cooperation and respect through violence. But we must high-
light this would not be a democratic behavior. Therefore, understanding the dy-
namic of intergroup dialogue is essential to comprehend the role of democracy
in the construction of intergroup cohesion.

Interpersonal Safety and Trust

The International Institute of Social Studies defines the indicator of inter-
personal safety and trust as:
“Interpersonal norms of trust and security exist to the extent that individuals
in a society feel they can rely on those whom they have not met before. Where
this is the case, the costs of social organization and collective action are re-
duced. Where these norms do not exist or have been eroded over time, it be-
comes more difficult for individuals to form group associations, undertake an
enterprise, and live safely and securely.”(International Institute of Social Stud-
ies. 2010)
The components of this indicator vary from subjective measures based in
peoples perceptions to objective measures based in crime rates.
According to Leigh, “in places where people trust one another, institutions,
markets and societies seem to work better.” (Leigh 2006:268) Leigh attributes
this better function to the ability of those societies to overcome market failure.
I do agree with this explanation, however, I think it is necessary to go deeper on
it.
Trust is in essence a personal feeling and therefore a subjective measure.
One association seems to me trickier than the others.
“Ethnic diversity might also be associated with lower levels of trust. This could
occur because those in homogenous communities have similar tastes, because
members of the majority group have an aversion to heterogeneity, or because
diverse communities find it more difficult to enforce a system of social sanc-
tions.”(Leigh 2006:269)
Because trust is a feeling that affects people behaviour, it is important to
investigate the psychological mechanism that generates this kind of social be-
haviour.
“Human beings, to a greater extent than other species, have the capacity to
organize the most complex impressions into internal models of the world,

13
 which enable us to recognize and understand the world that we experience and
to predict the outcome of our own and others’ behavior.” (Parkes 1988:53)
Put in a diagram we have the following:
Figure 1 – Internal dynamics of security

This mechanism differs us from other animals and can be exactly the one
we are looking for to explain how trust and safety can influence human actions
in a way that foster equality. Let me introduce another diagram in order to ex-
plain the problem cycle.
Figure 2 – Social interaction of distrust

What we see in this diagram is that when we have uncertainty (lack of trust)
about the other, the models we develop about the world impose many re-
strictions and defense mechanisms in order to keep our sense of security. In
physical terms it is, for example, constructing walls or fences around the prop-
erty to prevent invasion. In legal terms, it can represent more complex contracts
that try to prevent all the possible problems. This behavior makes people keep
some distance from the others in order to avoid aggressions and can decrease
intergroup cohesion, because it increases the costs of acquaintanceship. With
less intergroup cohesion people, the dialogue is impaired, people start to ignore
others necessities and take decisions based in individual interests. This individu-
alism can increase inequality. More inequality may generate a sense of unfairness
that increases the lever of uncertainty among people, restarting the cycle.
14
 This cycle shows us some interrelation between intergroup cohesion and
interpersonal trust. Moreover, as in the case of intergroup cohesion the uncer-
tainty about the other is in the base of the problem. As aforementioned, it can
only be decreased through intergroup dialogue, respecting the characteristics and
limits presented by Schoem.
But why does this give societies the ability to overcome market failure? The
answer to this question is probably in reducing the costs of acquaintanceship
and/or in creating bridges that eliminate the asymmetry of information. The in-
dividuals don’t need to spend time trying to generate impossible perfect con-
tracts because they know few problems will arise and they trust that those prob-
lems can be solved through dialogue in a fair manner.

Inclusion of Minorities
There is a hypothesis in this work that more inclusion will foster equality.
Fund and Wright, when talking about Empowered Deliberative Democracy,
partially explain the process through which inclusion can foster equality.
Empowered Deliberative Democracy (EDD) is a reform process that “as-
pires to deepen the ways in which ordinary people can effectively participate in
and influence policies that directly affect their lives. 
 It has the potential to be
radically democratic in its reliance on the participation and capacities of ordinary
people. It may surpass conventional democratic institutional forms on the quite
practical aims of enhancing the responsiveness and effectiveness of the state
while at the same time making it more fair, participatory, deliberative, and ac-
countable. (Fung and Wright 2003:7-8)
There is an assumption here that by enhancing governmental responsive-
ness and effectiveness, “Inclusion” may contribute to foster equality. However,
as we will mention in the session about inequality, inequality reduction cannot
be ensured only based in effectiveness. The point is that an organization is ef-
fective when it is able to achieve the planned goals with the lowest cost possible.
In this situation, the inequality reduction will be achieved only as an unintended
externality or if it is deliberatively settle as an institutional goal. At this point, we
can agree that is likely that by including minorities in the decision making pro-
cess, it is possible to make it more pro-equality. However, as mentioned when
talking about intergroup cohesion, the equilibrium can also occur pro-rich or
pro-middle class.
Looking specifically to the indicator, we find the following definition:
“Inclusion of Minorities measures levels of discrimination against vulnerable
groups such as indigenous peoples, migrants, refugees, or lower caste groups.
This measure focuses upon whether there is systemic bias among managers,
administrators, and members of the community in the allocation of jobs, ben-
efits, and other social and economic resources regarding particular social
groups.”(International Institute of Social Studies. 2010)

15
Chapter 3 - Understanding Democracy

Starting by the etymological meaning of the term, democracy comes from

ancient Greek and combines dëmos, the “people”, with kratos, meaning “rule”,
“power”. Thus, democracy is something like the power of the people. Because
the term was born in Greece, it is instructive go back in history and defines what
democracy had meant to that people.
In Athens, the most prominent Greek Democracy (508 BC – 322 BC), the
citizens voted on legislation and public decisions directly (Direct Democracy) in
their own right. To be able to vote, a person should be born in Athens, could
not be a slave, should be an adult (finish the military service) and it was neces-
sarily male. As we can see, many of the human rights that we defend today were
not respected at this moment. Therefore, this democracy was definitely not able
to ensure equality. Actually, democracy (or its main element, elections) was used
to impose a group supremacy over other groups.
Despite of being important, because it was the origin of Democracy, the
Greek Democracy is considered very peculiar and impossible to spread world-
wide, due to the necessity of direct participation, what in that moment also re-
quired physical presence.
It was the Roman Democracy (509 BC - 29 BC) that evolved to the democ-
racy we most commonly have nowadays.
“The Roman Republic was governed by a complex constitution, which cen-
tered on the principles of a separation of powers and checks and balances.”
(Crabben. 2011)
As we can see in Crabben, the Roman Democracy was looking for a balance
between different and diffuse power. In the Roman Republic the citizens chose
representatives (Indirect or Representative Democracy) to take decisions in the
Senate, while they could take direct decisions (Direct Democracy) in the local
level through the Roman Assemblies. However, as in Greece, in the Roman Re-
public, the title of citizens was not given to everybody. Only male, free man
could be “citizen”. Foreigners could become a citizen, but to vote they needed
to go to Rome and because it was difficult for them go there, in practice they
could not exercise their rights. Therefore, the Roman Democracy was also inca-
pable of ensuring equality.
Many centuries later, during the English Civil War, the Puritans were look-
ing for alternatives to Monarchy and the alternative that best fitted their interests
was the development of a government chosen by the population. (Dahl 1989:28)
However, be represented by someone else is not something very natural to a
human being, therefore the idea took a lot of time to be accepted and only in
the XVIII century, it really became pervasive. The most eloquent justification to
the idea of representation can be found in Montesquieu.
“As in a country of liberty, every man who is supposed a free agent ought to
be his own governor; the legislative power should reside in the whole body of
the people. But since this is impossible in large states, and in small ones is sub-
ject to many inconveniences, it is fit the people should transact by their repre-
sentatives what they cannot transact by themselves.” (Montesquieu 2001:176)

16
 The impossibilities presented by Montesquieu are based in the costs of par-
ticipation. A person that decides to participate in the political arena must dedi-
cate time and very often spend money with transport (just to cite the most ob-
vious financial cost). Those that organize the meeting must pay for place,
furniture, office supplies and must dedicate a lot of time in the process of or-
ganization and communication related to the meeting. When the number of in-
dividuals in a community starts to grow those costs become higher and higher,
people must pay not only for transport but also for accommodation, the process
of communication become much more complex and the costs of organization
explode. Those are the costs that, according to Montesquieu, make direct de-
mocracy impossible in large countries.
Montesquieu’s idea of representativeness is however contested by Dahl,
that affirms:
“Representation was no invented by democrats but developed instead as a me-
dieval institution of monarchical and aristocratic government.”(Dahl 1989:29)
This statement of Dahl sees Representative Democracy as a toll of manip-
ulation, a way of distributing de jure power, while keeping the de facto power. It is
interesting to note that Dahl do not criticize the argument of Montesquieu about
the infeasibility of the process. What Dahl makes is change the focus, he brings
the debate to a more theoretical perspective, where no matter the costs initially
it is necessary to understand if representative democracy can offer the commu-
nity the same benefits of direct democracy. Dahl understands that it cannot, and
it was not created with this goal, it is only a mechanism of manipulation.
Acemoglu and Robinson present the distinction between de jure and de
facto political power. They state:
“While the former is the type of political power allocated by political institu-
tions (such as constitutions or electoral systems), the latter emerges from the
ability to engage in collective action, or use brute force or other channels such
as lobbying or bribery.” (Acemoglu and Robinson 2006:325-326)
The distinction is pretty obvious: one thing is what is written another is how
what is written can represent the demands from those that do not choose di-
rectly.
The negative perspective of Dahl (1989:29-30) goes further with the idea
that representation is a manipulative way of democracy, but at the same time he
highlight 6 main consequences of the union between democracy and represen-
tation, three of them are good and three, bad:
1. Popular government can be extended to include vast number of people;
2. It is given space for the flourishment of personal rights and individual
freedom;
3. The capacity of citizens to govern themselves was greatly enhanced;
4. Development of a new complex net of institutions;
5. People were kept in a certain distance from the power (process of deci-
sion making);
6. The idea of political conflict as a normal social entity weakened the ideal
that a person should look for “the public good”.

Another important element that Dahl presents is the debate about the fa-
therhood of representative democracy. While Montesquieu defends the fathers

17
of representative democracy were democrats, Dahl defend the fathers are the
Aristocrats. In this work, the debate about whether Democrats or Aristocrats
developed the concept of Representative Democracy is irrelevant.
For us, what really matters is that nowadays Representative Democracy is
the most common and widespread form of Democracy and all groups within a
society recognize its importance. If we have a consensus about the importance
of representative democracy, we cannot affirm the same thing about the defini-
tion of Democracy. We can still notice differences among the concepts.
Let’s start with the liberal perspective:
“The essential idea of democracy is that the people have the right to determine
who governs them. In most cases they elect the principal governing officials
and hold them accountable for their actions. Democracies also impose legal
limits on the government’s authority by guaranteeing certain rights and free-
doms to their citizens.” (Sodaro (2004) as cited in Campbell 2008:5)
This perspective focuses in free choice of representatives. The idea of indi-
viduals choosing what is better for them can only be achieved in an indirect way,
and therefore it is not the focus. Moreover, it has as its main element the electoral
process. It is very well linked with the consequences presented by Dahl.
However, Campbell criticizes the concept of Liberal Democracy and ob-
serves:
“Liberal democracy certainly shows strengths with regard to the fundamental
principle of freedom. But (western-style) liberal democracy also shows (sub-
stantial) weaknesses concerning the fundamental principle of equality.” (Camp-
bell 2008:9)
This quote brings an important element to this work. According to Camp-
bell, Liberal Democracy fails in enforcing equality. What is the dynamic that
makes it happen?
As aforementioned, Dahl attributes to the Representative Democracy the
ability to weaken people’s considerations about the “public good”. In this sce-
nario, the enforcement of individual values and freedoms creates a society in
which individuals are looking for their own well-being.
As we can see this ideal of Liberal Democracy fits perfectly the idea of free
market. Both are based in the assumption of the invisible hand that will arrange
the collective benefits. If on one hand Liberal Democracy is closed linked with
Capitalism and free market, on the other hand Marxist Democracy is linked with
Socialism and Communism. While Liberal Democracy fails to achieve social
equality, Marxist Democracy, in it turns, fails in support individual freedom.
“Marxism's distinctive approach (and, hence, contribution) to democracy fo-
cuses on the objects of democratic decision-making: the ‘what’ of democracy's
concerns. (…) ‘True democracy,’ which entailed "abolishing class differences,"
(Wolff 2009:113)
By putting the social equality over individual rights, Socialism intent to cre-
ate a society truly democratic. In Marxist terms, the true Democracy is the de
facto equality between people, but not necessarily freedom of choice. This lack
of interest for the opinion or the process of understanding people’s interest
shows up in the Marxist Democracy, because they have an assumption that peo-
ple’s objectives are objectively knowable.

18
 “Karl Marx and his followers, who argue that formal democracy is in effect
captured by the bourgeoisie, and the outcomes of democratic elections do not
really reflect the true interest of ‘the people’. These interests are in some sense
objectively knowable even in the absence of procedural methods for revealing
citizen preferences such as elections, and can be promoted by authoritarian
regimes speaking ‘in the name of people’.” (Fukuyama 2012:5-6)
The implosion of socialism in the world showed the perspective was not
feasible. After Socialism’s decadence, the Marxist Democracy has also eroded.
The supremacy of Capitalism and its individualist point of view imposes chal-
lenges to equality in Democratic Regimes.
One could argue that this preoccupation is a political choice or even that
the decrease in inequality will occur in the long term, when the democracies are
more mature. However, cases such as that of Hugo Chaves in Venezuela that
undermined democratic institutions in the name of greater social equality (Fu-
kuyama 2012:4) can show that the poor are not intending to wait for the long-
term perspective. This has also increased the preoccupation that inequality may
threat Democracy.
“The concern that poverty and economic inequality pose a threat to the quality
and even survival of democracy has taken on new urgency in recent years.”
(Plattner 2012:ix)
In fact, the lack of development (understanding development here as the
reduction or elimination of poverty) has really threat regimes (not only democ-
racies) around the world. If on one hand we can see democratic regimes in Latin
America becoming less democratic, on the other hand the emergence of the
Spring Revolution and the protests in Hong Kong in favor of democracies
shows that dictatorships are not safe at all.
Summarizing, on one extreme we have Liberal Democracy and its commit-
ment with jure equality, on the other extreme Marxist Democracy and its commit-
ment with de facto equality. Both however seem incapable of generating the bal-
ance between process and result that a socio-economic system needs. In order
to better understand the dynamics that threats equality in Liberal Democracies,
it is interesting to understand its main element, elections.

Understanding the dynamics of elections

Let’s start this session with a simple case.
Situation 1 - Hypothetic society, two alternatives, and every person must
choose only one alternative. Win the alternative that receives more than 50% of
the valid votes.
This simple scenario is the representation of elections that we have in mind.
It works well because each individual freely choose the alternative that best fits
to him/her. In the end, the sum of individual preferences gives the final result
that is the collective preference. At this situation, the position of the pivotal
voter1 determines the collective preference. One could argue that this vision is
too simplistic, very rarely we have to choose only between two options.

1The pivotal voter is the one that fulfill the position 50% + 1 in the distribution of
preferences.
19
 Actually, it is not rare, this scenario happens in all the regimes that choose
their representatives in a two rounds system (TRS). In other words, this is exactly
the scenario that happens in the second round of TRS. In order to give you idea
of how spread is this system, it is important to inform that the following coun-
tries adopt two rounds in their electoral process: “France, most Latin American
countries, all the five post-Soviet Central Asian republics, and many countries in
francophone Africa use TRS to elect their presidents. Elsewhere in Africa, the
system is used by Angola, Cape Verde, Gambia, Ghana, Guinea-Bissau, Kenya,
Liberia, Mozambique, Namibia, Nigeria, São Tomé and Principe, the Seychelles,
Sierra Leone, Sudan, Tanzania, Uganda, and Zimbabwe; in Europe, apart from
France, it is used by Armenia, Azerbaijan, Austria, Belarus, Bulgaria, Croatia,
Cyprus, Finland, Georgia, Lithuania, Macedonia, Poland, Portugal, Romania,
Russia, Slovakia, Slovenia, and Ukraine; and it is found in Afghanistan, Haiti,
Indonesia, Iran, Timor-Leste, and Yemen.” (Ace Project. 2014)
However, we must recognize this is only one possibility and it is not even
the most common one, because even in a country that adopt the two round
system, the first round do not follow this rule. Therefore it is important to ask
what happens when we have more than two elective options.
Situation 2 – Hypothetic society, three alternatives, and every person must
choose only one alternative.
The immediate problem of having three alternatives is that now it is very
possible that we will not have one of the alternatives with more than 50% of the
votes. In order to solve this problem we can either do the elections in two rounds
or accepting the winner even without the majority of the votes.
Situation 2a – Situation 2 + win the candidate with more votes
In this kind of elective process, each person chooses only one candidate.
The most common behavior is that rational individuals rank their preferences,
instead of choosing only one. In other words, it is normal, even if it is not for-
mally manifested, that an individual decide that it prefers "A" more than "B",
and "B" more than “C”. It is very difficult to see people choosing only the “win-
ner”.
Kenneth Arrow discussed the problem that arises in this kind of process.
He named it “Paradox of Voting”. According to him, when we have three alter-
natives and the individuals scale those preferences, “the method for passing
from individual to collective tastes fails to satisfy the condition of rationality, as
we ordinarily understand it.”(Arrow 1976: 3). The diagram bellow details the
known paradox of voting.

20
 Figure 3 - Paradox of voting

As you can see, the election process would be a simplification of the process
of choice that is incapable of capturing all the preferences of individuals. What
Arrows shows us is that when choosing between more than two alternatives, the
election process always ignores the secondary and tertiary preferences of indi-
viduals, framing conclusions (results) that are rationally incongruent.
When the system confirms the result of this choice as the sovereign choice,
it internalizes those mistakes. This problem is serious and this is the case for
presidential elections in Bosnia and Herzegovina, Cameroon, the Comoros Is-
lands, Equatorial Guinea, Guyana, Honduras, Iceland, Kiribati, South Korea,
Malawi, Mexico, Palestine, Panama, Paraguay, the Philippines, Rwanda, Singa-
pore, Taiwan, Tunisia, Venezuela, and Zambia.”(Ace Project. 2014)
Situation 2b – Situation 2 + If any candidate can achieve 50% + 1 of the
votes, (s)he dispute with the second position in a second round.
Situation 2b can be draw to minimize the effects of the superficial judgment
presented in situation 2a. What happens is that the second round gives people
the possibility to adjust the secondary preferences. This benefits initially those
whose first alternative had lost in the first round and bring the situation back to
what we expressed in situation 1. By reducing the possibilities of choice to two
the electoral system reduces the superficiality of the choice and minimize the
problems identified in the Paradox of Choice. The countries that use this system
have been aforementioned.
Situation 3 – Situation 2b + vote not mandatory
In a simplistic conclusion, the introduction of not compulsory voting would
be useful to defend riches’ interests, because as summarized by Bonica et al:
“If those with lower incomes are less likely to vote, then the political system
will be less responsive to a rise in inequality.”(Bonica et al. 2013:110)
Why does it happen?
In a situation in which voting is an option not a duty, the decision to vote
is determined by individual’s political interests. Steven Rosenstone after analyz-
ing two elections in the US showed that poor people are less likely to vote.
Therefore, the liberalization of voting would move the median voter to a richer
position, reinforcing the interests of more fortunate classes. In this scenario, we
would have a situation in which the difference between de jure power and de facto
21
power is fostered and instead of fostering equality democracy would increase in-
equality.
When analyzing the income redistribution Stigler noticed what become
know as the Director’s Law.
“Public expenditures are made for the primary benefit of the middle classes,
and financed with taxes which are borne in considerable part by the poor and
the rich.”(Stigler 1970 as cited in Feld and Schnellenbach 2007:4)
Later, scholars noticed that despite of not being universal, the Director’s
Law is likely to occur under some institutional framework. (Feld and Schnellen-
bach 2007:2) If we correlate the Director’s Law with the median voter theorem,
it is possible to better understand the possible impacts of free voting in a dem-
ocratic process. The situation become even more complicated when we notice
that only 11 countries in the world enforce compulsory voting: Argentina, Aus-
tralia, Brazil, Cyprus, Ecuador, Liechtenstein, Luxembourg, Nauru, Peru, Singa-
pore and Uruguay. (Central Intelligence Agency. 2013) This means that in all
other democracies not mandatory voting is probably reinforcing inequality.
Situation 4 – Situation 3 + private money used in the campaigns
Another important element when talking about elections is understanding
how it is financed and the impact of this on the democratic process. As empiri-
cally and theoretically observed, “campaign expenditures increase the probability
of election.” (Potters et al. 1997:22) In other words, more a candidate spends in
elections, more chance it has to win. This generates a situation in which candi-
dates run after sponsorship. If the electoral system allows private campaigns,
candidates will run after companies and for sure those companies will not fi-
nance a campaign because they are altruists. The objective of a company is profit
and it will evaluate this money as an investment. A company will not invest in a
candidate whose ideas will harm their business. Therefore, introduction of pri-
vate money in political campaigns affects candidates' positions. The electoral
discourse start to be created based in the desire of receiving contributions. (Prat
2002:163)
When analyzing the US context, Bonica et al shows that the majority of the
contributions come from the richest people.
“The share of campaign contribution made by the top 0.01 percent of the
voting age population is now over 40 percent.”(Bonica et al. 2013: 111)
In other words, when private financing is accepted in elections, in order to
receive contributions the candidates must align themselves with the rich, other-
wise, they will compromised their elective process. This makes democracy foster
inequality.
According to the International Institute for Democracy and Electoral As-
sistance, 60 out of 180 countries finance their elections exclusively using private
money, making the situation even worse. Those countries are: Afghanistan, An-
dorra, Antigua and Barbuda, Bahamas, Bangladesh, Belarus, Belize, Bolivia, Bot-
swana, Cambodia, Central African Republic, Comoros, Dominica, Egypt, Fiji,
Gambia, Ghana, Grenada, Guinea, Guinea-Bissau, Guyana, India, Iran, Islamic
Republic of, Iraq, Jamaica, Kiribati, Kyrgyzstan, Lebanon, Liberia, Libya, Malay-
sia, Malta, Marshall Islands, Mauritania, Mauritius, Micronesia, Federated States
of, Moldova, Republic of, Myanmar, Nauru, Nepal, Nigeria, Pakistan, Palau,
Philippines, Saint Kitts and Nevis, Saint Lucia, Senegal, Sierra Leone, Singapore,
22
Solomon Islands, Sudan, Suriname, Swaziland, Switzerland, Trinidad and To-
bago, Turkmenistan, Ukraine, Vanuatu, Venezuela, Zambia. (International In-
stitute for Democracy and Electoral Assistance. 2012)
In this subsection, I tried to point out how elements of the electoral process
could influence in the outcomes of democracy, limiting redistribution. Those
explanations are based in the Pivotal Voter Theory that says:
“A pivotal voter in society decides on the value of some redistributive policy
instrument. (…) the redistribution decision generally depends on the distance
between the income or wealth of the pivotal agent and the mean income in the
economy,” (Bourguignon and Verdier 2000: 285-286)
A proper question that we didn’t answer up to now would be: when the
pivotal voter can have income greater than the median. Bonica et al answer that
this usually happens when the turnout is unequal. But what makes the turnout
unequal? The turnout can be unequal for many reasons, but the two most im-
portant are:
1. A society has a great number of poor residents without voting rights,
for example, foreigners; and

2. The practical costs (need of transportation, lack of will to participate

politically, etc.) for voting are too high for the poor (as it was to the
foreigners in the Roman Republic).

The Impact of Free Market Ideology in Democracy

Beyond the election elements that I have introduced, Bonica et al also men-
tion the adherence to the idea of free market as one of the elements that can
make democracy unable to reduce inequality. The argument is that the ideology
of free market reduces the government provision of transfers, lower marginal
tax rates for those with high incomes, and deregulation of a number of indus-
tries. (Bonica et al. 2013:104)
However, if we keep straight connection with the theory, only the deregu-
lation of a number of industries is a direct effect of free market, the others (gov-
ernment provision of transfers and lower marginal tax rates for those with high
incomes) are political decisions that often follow the free market ideology, but
that are not mandatory. I mean: it is possible to a government to allow free com-
petition in the market without necessarily giving up redistribution programs.
Therefore, I think this phenomenon cannot be properly explained without look-
ing at the political arrangements that support the process of decision-making.
Nonetheless, many authors affirm that “market failure is a major and grow-
ing source of income inequality in the United States.” (Weeden and Grusky
2014:473) And some also insist this is not an exclusive American problem, but
a problem that will arise in any liberal market economy.
“Market competition is responsible for the high baseline level of inequality in
liberal market economies (LMEs), and a more recent wave of deregulation and
other competition-enhancing reforms pushed levels of inequality in LMEs even
higher.” (Weeden and Grusky 2014:474)

23
 Other authors such as Helen Hughes, goes in the opposite direction, argu-
ing the problem is the excess of governmental intervention. She argues that
“governments should introduce specific measures to liberalize their economies”
(Kakwani and Krongkaew 2000:10) in order to eliminate inequality. The argu-
ment here is that competition would increase growth and by doing that it would
reduce absolute poverty.
Her answer is actually a confusion of terms, once reducing absolute poverty
is not the same of reducing inequality. In other words, it is possible to reduce
poverty and increase inequality. Imagine, for example, that 80% of the country’s
growth benefits the riches. The resting 20% would increase the situation of the
poor. They would be in an absolute situation better than before, but inequality
would also increase. This argument opens space to discuss if inequality is really
bad or not. We will treat this subject later.
Going back to the relationship between Democracy and inequality, the anal-
ysis that Bonica et al (2013) do about the process of polarization in the US brings
a more comprehensive and solid explanation of the deficiencies of the demo-
cratic process in the phenomenon. They show “a polarization in the American
Congress caused by the movement of Republicans to a more conservative posi-
tion, this polarization aligned with the Republican ability to sustain a Senate fili-
buster, unbalance power relations in favor of the conservatives. The Democrats,
on the other hand, have won elections in large part to voters’ concerns about
issues other than redistribution to the poor and depend on resources from rich
people to finance their electoral campaigns.” (Bonica et al. 2013:107)
Both combined bring us to the conclusion that:
“Lower support for policies that would influence inequality may result from
an increase in polarization coupled with a greater adherence to free-market ide-
ology, which is in turn supported by campaign contributions from the rich.”
(Bonica et al. 2013:107)

The aforementioned mechanism is represented in the following graph.

Figure 4 – Impact of polarization in inequality

24
 In addition to the scheme presented above, it is possible to highlight distor-
tions in the political process caused by institutions that reduce the accountability.
The points presented by Bonica et al serve as warning against the blind faith
in democracy and give us the first insights to understand why democracy, mainly
the one that focus in elections, has not necessarily conducted countries to better
social conditions.

Democracy beyond elections

Huber et al establish the elements that compose Formal Democracy:
“By formal democracy we mean a political system that combines four features:
regular free and fair elections, universal suffrage, accountability of the state's
administrative organs to the elected representatives, and effective guarantees
for freedom of expression and association as well as protection against arbitrary
state action”(Huber et al. 1997:323)
Bresser-Pereira goes further and drew a history of democracy initiating in
the Aristocratic Republic, passing through Liberal Democracy, Social Democ-
racy and arriving in the Participatory Democracy. According to him, “only after
a capitalist revolution and after a liberal period – XIX century – more developed
countries were capable to adopt the universal suffrage and by doing this become
democracies.”(Bresser-Pereira 2005: 79)
This close link between capitalism and democracy is a very interesting point,
because capitalism doesn’t have as one of its values equality. Moreover, in this
period of time, the concept of democracy was very elitist and the work of
Schumpeter shows this characteristic when he affirms:
“The people doesn’t hold a definite and rational opinion about every individual
question (…) in a democracy, as I have said, the primary function of the elec-
tor’s vote is to produce government.”(Schumpeter 1976:269,273)
Still according to Bresser-Pereira, “media made politicians responsible for
their actions and in parallel workers were organizing themselves and left-side
political coalitions started to assume the power. Those changes made democracy
evolve to Social Democracy. More recently, the role of non governmental or-
ganizations looking for social accountability increased and Democracy is evolv-
ing to a Participatory Democracy.”(Bresser-Pereira 2005:79)
Bresser-Pereira describes the evolution of democracy in a way that make us
believe in a system that is able to promote more equality. The assumption behind
this statement is that free media could generate accountability and through this
accountability people could reinforce their demands. Moreover, by organizing
themselves in social groups they would be able to pressure more. This is the first
time in this work that we are admitting that a democratic mechanism can foster
equality. But let’s keep this discussion in stand by and focus in the kinds of de-
mocracy.
Huber encompasses Bresser-Pereira and adds the concept of Social Democ-
racy, that has similarities with the concept of Social Democracy aforementioned,
but it is not the same.
“We therefore introduce two additional dimensions: high levels of participation
without systematic differences across social categories (for example, class, eth-
nicity, gender) and increasing equality in social and economic outcomes. We
25
 call a political system that meets the requirements in the first four plus the fifth
dimensions participatory democracy. Social democracy denotes a political sys-
tem that meets the requirements in all six dimensions”(Huber et al. 1997:324)
The investigation we did about the dynamics of elections demonstrates the
fragilities of the formal democracy in achieving social gains for the poorest. Hu-
ber proposes that the reason for this gap is the incapacity of Formal Democracy
to entail a uniform distribution of power.(Huber et al. 1997:323-324)
On the other hand, we do not consider the sixth element proposed by Hu-
ber a constitutive element, but a measure of outcomes. Because in this work we
are interested in measure the capacity of the constitutive elements of democracy
to ensure or promote equality, we will not consider the Social Democracy of
Huber as an object of analysis.
We understand the Social Democracy as the desired objective in itself, not
the path to achieve another objective and, therefore, this work will adopt the
concept of Participatory Democracy as the second type of Democracy to be
compared with indices of inequality in order to investigate the impact of De-
mocracy in inequality.

Participatory Democracy
As can be seen in the Huber’s concept presented above, the element that
differentiates the Participatory Democracy from the Formal Democracy is the
high levels of participation. Huber goes further requiring the lack of systematic
differences across social categories. We will not consider this characterization
because it is very difficult to measure the level of participation separated by social
groups. This explains why we will focus in the level of participation.
Fung and Wright go further and state the central ideals of democracy:
1. “Facilitating active political involvement of the citizenry;
2. Forging political consensus through dialogue;
3. Devising and implementing public policies that ground a productive
economy and healthy society;
4. Assuring that all citizens benefit from the nation’s wealth (in a more
radical egalitarian version)” (Fung and Wright 2003:3)
As we can see, according to Fung and Wright democracy and participation
are almost synonymous and democracy without participation is not democracy.
However, one could question what makes us think that a Participatory Democ-
racy would be more effective in reducing inequality. This question is interesting
because even if we consider that participatory democracy is a better democracy,
we still need to prove the assumption that democracy can solve inequality. In
the point of view of this work, the answer to this question passes through the
understanding of the limits of elections aforementioned and through other as-
pects. The following characteristics make us think that participatory democracy
is more likely to reduce inequality:
1. The cost of popular participation is reduced when the arenas of partici-
pation are widespread.

26
 2. The bargain power of the poor is strengthen, when more poor people
participate in the political system.

3. De facto power move to the hands of the most vulnerable, when they are
participating in decision processes that direct affect their wellbeing.

This perspective is aligned with Stack’s statement that “democratic political

organization may not have a substantial impact on reducing inequality unless a
relatively large proportion of lower status citizens take advantage of democratic
structures.”(Stack 1979:169)
However, we also need to take into consideration Bonica et al. advise:
“The mass public may well embrace such an ideological shift if rising inequality
nonetheless "trickles down" to rising incomes and home ownership for all.”
(Bonica et al. 2013:104)
This means that even if the de facto power is on the hands of the poor, it is
still possible that they will not choose to finish inequality. In other words, there
are other issues that threat the end of inequality and go beyond the process of
participation. Therefore, it is important to measure if higher levels of participa-
tion are really positively influencing the end of inequality.
When looking at Democracy we can evaluate it based in its intrinsic value
or considering it as an instrument to achieve other important values. Some peo-
ple take this ability of democracy to achieve other important values as granted.
“The value of democracy as an instrument for securing many of the other
things that we value is well established; I take it as given that a substantial rea-
son for valuing democracy lies in its effectiveness as a reliable instrument for
gaining and defending other valued ends, including liberty and social justice.”
(Ober 2006:1)
Here, we will not take this effectiveness as granted. As aforementioned, we
want to test the ability of democracy to foster equality. This doesn’t mean, how-
ever, that we disregard the intrinsic value of Democracy. A good manner to un-
derstand the intrinsic value of democracy is asking ourselves if we would prefer
a benevolent dictator or a democracy able to ensure the same results. I would
definitely prefer Democracy for understanding that the freedom of choice is a
very important value for human beings. Actually, the capacity to act as a rational
individual is the most differentiating characteristic we have. And one element
of acting rationally is taking decisions. When talking about the intrinsic value of
Democracy, Ober goes even further.
“Political participation has noninstrumental, as well as instrumental, value for
humans because of the kind of beings we are. It is because we are, as Aristotle
saw, a political-animal kind of being that the opportunity for exercising a natu-
ral capacity for practicing democracy, defined in a minimal sense as “associa-
tion in public decision,” is for us a good-in-itself that is both inherently happi-
ness-producing and necessary to our full happiness. It is necessary to our
complete happiness because, along with (for example) our capacities to reason
and to love, the capacity to associate ourselves in decisions through the me-
dium of speech is constitutive of our distinctive kind of being.”(Ober 2006:2-
3)
This clarification is important because this work doesn’t want to deny the
importance of Democracy. We just want to better understand if democracy can
27
ensure development or if it is necessary to add some elements in the democratic
process in order to ensure it. If our analysis point to the second case, it is also
important to understand if those changes must be done in the macro or micro
level of the democratic process. A change in the macro level would point to
changes in structures and rules while a change in the micro level would be more
related to the human relationships or human consciousness.
The perspective behind democracy is that through dialogue human beings
are able to solve conflict. This is what we must understand when we say that
human beings are political-animals. However, Politics is based in a structural
element, dialogue. And a political environment will be more successful as it is
able to make different groups find a consensus. Therefore, intergroup dialogue,
the theme in which I will focus next is so important.

Intergroup Dialogue as an essential element of

Participatory Democracy
The first thing we must say about intergroup dialogue is that it is in the
essence of democracy. Without intergroup dialogue there is no democracy, be-
cause Democracy is the power of people, not imposition of power over a people.
However, Formal Democracy doesn't give enough attention to direct intergroup
dialogue, by fostering representation it limits the dialogue to those that can be
in the Parlament and this condemn the majority to individualism. (One goes to
the ballot, put his/her vote there and that is it)
In the concept of Rosenblum (1998) this would not be a strong democracy.
He states:
“A strong democracy today requires both that citizens be engaged in civil life
and that they act together in a spirit of social justice, speaking out individually
and collectively against injustice.”(as cited in Schoem 2003:213)
We will assume this vision later in this work, for now, it is important to
understand the role of intergroup dialogue, once it was the indicator that can (at
least partially) explain the evolution of certain countries in Latin America against
inequality.
Why is intergroup dialogue so important? The explanations are:
1. It helps people to build bridges across the dramatic demographic diver-
sity of their fellows, including the prejudice and hurtful incidents that
erupts in their space of coexistence(Fernandez 2001, McKenna and
Sauceda 2001, Tiven 2001 as cited in Schoem 2003:214);

2. It creates a just environment where all participants carry equal status in

the dialogue arena (Schoem 2003:214);

3. Very often people from both “rival” groups compose the facilitation
team (Schoem 2003:215);

4. The process it uses value open discussion and introspection (Schoem

2003:215);

28
 5. “The process encourages respectful behavior and careful listening”
(Schoem 2003:215)

In summary, “through intergroup dialogue community members learn to

confront, on both a personal and theoretical level, the confining and stratified
walls of their segregated ‘comfort zones’.”(Schoem 2003:215)
This makes clear that we are not talking about every kind of dialogue. In
order to be able to satisfy those hypotheses, the intergroup dialogue must have
some characteristics that Schoem highlights in his paper.
1. “It is a process, not an event. 

2. It is about relationship-building and thoughtful engagement about dif-
ficult issues.
3. It requires an extended commitment.
4. It takes place face-to-face.
5. It takes place in at atmosphere of confidentiality, and issues of 
 spon-
sorship and context are important to its success.
6. It often focuses on race, but they also address multiple social 
 identity
issues that extend beyond race.
7. It focuses on both intergroup conflict and community building. 
 It is
intense, difficult work, and only occasionally is it a “feel-good” 
 expe-
rience.
8. Skilled facilitators lead it.
9. It is about inquiry and understanding and the integration of 
 content
and process.
10. It involves talking, but doing often leads to good talking, and 
 dia-
logue often leads to action.” (Schoem 2003:217)
Here, we can see why Formal Democracy can have a weak relation with
inequality. Formal Democracy bases its democratic process in events (elections);
it looks at individuals more than on the community needs, this weaken the rela-
tionship-building process and deprive the importance of intergroup conflicts
and community-building.
In the background, there is the assumption that through individual action,
the individuals can foster collective gains, what instead of extending commit-
ment to common wellbeing decreases it. It is very often limited to the relation
between people and paper ballot or people and machine (electronic election),
limiting or eliminating face-to-face relations and devaluing the importance of
dialogue. It is focuses in choosing a person that will take all the decisions in the
name of all, what makes impossible the understanding and integration of content
and process.
Therefore, by fostering individual behavior, Formal Democracy indirectly
weaken the process of intergroup dialogue, what in its turn foster isolation of
groups. The process of bridge building is also affected once individuals start to
believe they don’t need each other. This way the sense of community is affected
and conflicts become more violent, because people start to defend positions in-
stead of looking for a common good. When looking at themselves people are
incapable of looking at the other’s needs. Empathy is damaged.

29
 When talking about Participatory Democracy, some would argue, I am talk-
ing about real democracy, because Participatory Democracy have elements that
foster intergroup dialogue, instead of individual protagonism. This is the most
basic difference between Formal and Participatory Democracy.
My assumption here is that a society in which Intergroup Dialogue is fos-
tered is more likely to have high levels of Intergroup Cohesion and Interpersonal
Safety and Trust. Because all the mechanisms I mentioned before, if this as-
sumption is not right, the risk that Democracy is incapable to solve conflicts in
a more sustainable way is very high. And if this high risk is true, then Democ-
racy’s value can be reduced to its freedom of choice.
As aforementioned, Participatory Democracy is more efficient in generating
intergroup dialogue than Formal Democracy, therefore I am considering that
higher levels in the Indicators of Intergroup Cohesion and Interpersonal Safety
and Trust advocates for Participatory Democracy. Therefore, I will test those
indicators in the regression analysis as elements of the Participatory Democracy.

30
Chapter 4 - Understanding Inequality

At this point, I want to interrupt the reflections about Democracy to start

the reflections about inequality. Inequality is the opposite of equality. But both
words can be used to compare the situation of two elements in almost every
single human characteristic. The most famous advocacy for equality can be
found in the Universal Declaration of Human Rights.
In this work, despite of recognizing the importance of the Human Rights, I
will not use the concept of equality (formal equality) presented in the Universal
Declaration of Human Rights.
“Article 1. All human beings are born free and equal in dignity and rights. They
are endowed with reason and conscience and should act towards one another
in a spirit of brotherhood.
Article 2. Everyone is entitled to all the rights and freedoms set forth in this
Declaration, without distinction of any kind, such as race, color, sex, language,
religion, political or other opinion, national or social origin, property, birth or
other status. Furthermore, no distinction shall be made on the basis of the po-
litical, jurisdictional or international status of the country or territory to which
a person belongs, whether it be independent, trust, non-self-governing or un-
der any other limitation of sovereignty.” (United Nations 1948)
I understand that formal equality is essential to ensure a solid democracy (it
is therefore fundamental condition to Democracy), but I want to understand if
democracy necessarily makes decisions converge to income equality. Behind this
hypothesis exist some assumptions: the first one is that income equality is not
necessarily a human value. The second one is that income equality is not neces-
sarily something fair or good.
A way to explain this second assumption was presented in the Brazilian TV.
The anchor asked about inequality to the Brazilian Economist Eduardo Gian-
netti and he answered the question telling the following metaphor:
“Two children are walking in the sidewalk and one of them find two apples,
one big and another small. The boy that found the apples keeps the big one
and gives the small one to his friend. His friend complains:
- You are unfair.
He immediately asks:
- If you had found the apples, what would you do?
His friend answers:
- I would keep the small one and give you the big apple.
He replies:
- But this is exactly what I have done. Why are you complaining?
His friend answers:
- Well, one thing is achieve this result voluntarily another thing is achieve this
result through your imposition.”(TV Cultura. 2011)
This metaphor shows that the problem about inequality is not the inequality
in itself, but the way this inequality is achieved and the level of consciousness

31
the individuals have about this choice. Some scholars also argue that the real
problem is the level of inequality that one society accepts, as we can see in Robert
Barro statement:
“While there is no particular correlation between inequality and grow in devel-
oped countries, there is a negative one for developing nations when levels of
inequality get to be very high.”(Barro as cited in Fukuyama 2012:8)
The assumption that a high level of inequality is a problem is similar to the
assumption that poverty is a problem. Moreover, the focus in inequality brings
the same preoccupation about social justice that the focus in poverty. Actually,
many authors make confusion between inequality and poverty, as we will see
later. In this context we understand inequality as the way income is spread
throughout the society. And we can assume that high levels of inequality are
negative. But how about low levels of inequality?
Mankiw seems more aligned with Gainnetti’s perspective and he advances
the studies point to two different ways to achieve inequality, the first one
through technological advances and the second one through political arrange-
ments. According, to him political arrangements would lead to inequality in an
inefficient way (Mankiw 2013:3-4), while technological advances would lead to
inequality in a positive way because it would result in capturing gains in the in-
ternational market (Mankiw 2013:5).
This way according to Mankiw’s perspective, levels of inequality kept low
through political arrangements can generate inefficiency in the productive sys-
tem. A good example of this inefficiency is the lack of incentives to make good
performance individuals keep high performance behavior.
“If it redistributes income too much, high productivity individuals will start to
act as if they are low productivity individuals.” (Mankiw 2013:10)
But at this point, we must follow the suggestion of Amartya Sen and firstly
define what means the inequality we are talking about. This is important, because
every theory of social arrangement demand equality of something (Sen 2003:13),
and this something is not necessarily the same thing from one theory to another.
Sen cites the following examples: John Rawls defends equal liberty and
equality in the distribution of ‘primary goods’, Ronald Dworkin cares about
‘treatment as equals’ and ‘equality of resources’, Thomas Nagel supports ‘eco-
nomic equality’, Thomas Scanlon endorses ‘equality’ in a more wider perspective,
Robert Nozick demands equality of libertarian rights, James Buchanan builds
equal legal and political treatment. (Sen 2003:13-14) Therefore, when talking
about equality or inequality it is important to define precisely what we are talking
about.
This work will deal with Income Inequality in the bases used to calculate
the Gini Index. We have chosen this based in the following reasons:
The Gini Index based in Household’s Income is the most used measure of
inequality and it is widespread, allowing us to compare different countries.
Income Inequality gives us a very good general image of the level of ine-
quality in a country.
However, we are conscious that by choosing this path (income inequality)
we will face an important problem:

32
 “The extent of real inequality of opportunities that people face cannot be read-
ily deduced from the magnitude of inequality of incomes, since what we can or
cannot do, can or cannot achieve, do not depend just on our incomes but also
on the variety of physical and social characteristics that affect our lives and
make us what we are.” (Sen 2003:29)
Inequality can also be measured based in consumption instead of income,
however, the aforementioned problem persist.
Sen proposes a view about development based in freedom. This multi-lay-
ered perspective take into consideration more subjective elements such as wishes
and possibilities of achieving, but it misses objectivity and impersonality, com-
promising the possibility to compare it with other time periods and other geo-
graphical spaces.
Nonetheless, we opted to use a money metric measure, because we under-
stand this is necessary to give people independency. In other words, we know
that some people have difficulties to convert income into well‐ being, but we
assume that without any income (money) the ability to generate well-being would
be even more compromised. As mentioned by Arne Bigsten and Jorgen Levin,
“income is a means by which other needs are satisfied.” (Bigsten and Levin
2004:252) Moreover, we understand that by using income we are aligned with
the definition of poverty aforementioned.
“At its most general level, poverty is the absence of acceptable choices across
a broad range of important life decisions—a severe lack of freedom to be or to
do what one wants.”(Foster et al. 2013:1)
And we opted to use income instead of consumption, because while income
demonstrates possibilities from which the individual must choose, consumption
can add to the analysis debits that instead of giving individuals freedom, limit
them even more in the medium and long terms.
Another important element we must cite here is the impossibility to trust
completely in the data set. We try to use a very reliable data set, however, many
problems can occur.
“Survey and price data can be out of date, the quality of the surveys varies
across countries and over time, some household surveys measure consump-
tion, others income, and international comparability is affected by difficulties
in estimating purchasing power parities across countries and over time.” (Nas-
chold 2004:112)

Inequality, poverty and development

When we speak about development, who listen to us can understand it in
very different perspectives. The most common one correlates it to growth and
poverty. Those that believe in this chain of thoughts believe that growth by itself
will benefit the most vulnerable ones and this way will promote development to
everyone.
“A common conclusion has been that growth, rather than distribution, is what
matters for poverty reduction. (…) The high inequality countries need growth
rates around three times as high as low inequality countries to achieve the same
rate of poverty reduction.”(Naschold 2004:109-110)

33
 The extent that liberal capitalism has become hegemonic, the idea of devel-
opment was related to poverty reduction. This perspective of development en-
compasses the perspective of growth and at the same time the perspective of
alleviating the negative externalities generated in the process of development.
“The most important goal for development efforts is to reduce poverty, and
this can be accomplished by economic growth and/or by income redistribu-
tion.” (Bigsten and Levin 2004:252)
This promotes a high level of ambiguity in the concept. And this ambiguity
makes it difficult to proper understand the relationship between inequality and
other social phenomena. Moreover, the importance of such a definition can be
extracted from two ideas: firstly, development has become the goal of almost
every country in this world; second, as introduced by Cornwall “the language of
development defines worlds-in-the-making, animating and justifying interven-
tion in currently existing worlds with fulsome promises of the possible.” (Corn-
wall and Eade 2010:1) In other words, the way development is understood di-
rectly impacts the actions of the government that on its turns directly impacts
the life of their citizens.
This perspective is however very partial. In many countries, the develop-
ment policies were unable to decrease poverty. The elite of the country captured
the benefits of the development’s policies. In order, to better evaluate the rela-
tion between inequality, poverty and development Felix Naschold’s econometric
analysis concluded:
“Growth clearly matters for poverty reduction. (…) The distribution of con-
sumption also matters for poverty reduction. Once, for a given level of con-
sumption, increases in inequality lead to higher levels of poverty. However,
there is no distinct pattern between the level of development and the size of
inequality. “ (Naschold 2004:113)
Despite the fact that Naschold is talking about consumption inequality in-
stead of income inequality, it is interesting to note the impact of inequality in
poverty reduction. The lack of distinct pattern between the level of development
and the size of inequality reinforces the idea that inequality in itself is not the
problem, but the way you achieve this inequality can be problematic. In this
context, understanding the process of development is mandatory. In other
words, democracy becomes a value in itself, even if it is not enough to generate
equality.
Another important element we must highlight is that if inequality (distribu-
tion of consumption) matters for poverty reduction, but doesn’t matter to de-
velopment. How is it possible to understand development as poverty reduction?
These results only make sense if we consider development something bigger
than poverty reduction and in this perspective the definition Sen presents about
development is more interesting:
“Development can be seen as a process of expanding the real freedoms that
people enjoy. (…) Development requires the removal of major sources of un-
freedom: poverty as well as tyranny, poor economic opportunities as well as
systematic social deprivation, neglect of public facilities as well as intolerance
or over activity of repressive states.”(Sen 1999:3)
Sen’s perspective about development is the understanding that makes this
work valuable. When we look at development as a way to give people freedom.

34
The first and most immediate conclusion is that development encompasses de-
mocracy, because one of the most basic freedoms we can have is the freedom
to choose and define our own path through life. This necessarily means freedom
to choose roles and duties of those that govern us.
Another important element in Sen’s definition is that it literally mentions
poverty as one of the unfreedom that must be eliminated. This perspective jus-
tifies our concern with inequality. One could say that poverty and inequality are
not the same. Actually, we said this here. So, why the incorporation of poverty
in Sen’s definition justifies our concern with inequality? As we saw in Bigsten
and Levin (2004), poverty reduction can be accomplished by economic growth
or income redistribution. This means that by reducing income inequality we can
reduce poverty.
Usually when we talk about development we talk about adding things: add-
ing money in the economy by growing; adding people in the market by profes-
sional qualification; adding consumption; intensifying the trade, etc. However,
nowadays the limits imposed by the environment advocates for a new perspec-
tive, where less is more. The advocates of sustainable development demand us
to spend less raw material, less pollutants, to consume less, etc. Those demands
can also be understood in an additive perspective. Less material is actually more
efficiency, less pollutants can be more technology or more elements of preser-
vation (filters in the factories, for example), to consume less can mean consume
better quality products that in some way can be more expensive. This means that
development has an intricate combination of additions and subtractions.
However, the majority of the theories about development discard this com-
bination. When talking about growth as development or when defining poverty
reduction as development, the authors loose the counterpart perspective. This
is another interesting element about Sen’s definition. He advocates for freedom
expansion, but he set clearly the counterpart perspective when he defines this
should be achieved by removal of major sources of unfreedom. Therefore, Sen’s
definition is very interesting and challenging.
Sen also advocate against tyranny and against repressive states. In this per-
spective, how can we evaluate the role of autocracies and democracies? I under-
stand that even if a dictatorship could foster economic development (growth
and poverty alleviation) or even social development (reducing inequality), it still
will lack great part of development, the part that is related to freedom of choice.
On the other hand, even if democracy is incapable of ensuring economic and
social development, it at least ensure people’s right to choose and therefore,
when democracy distributes de facto power it necessarily promotes develop-
ment. In conclusion, autocracies can complete fail in promoting development,
once there is no reason to believe that it will promote social and economic de-
velopment and it immediately fail in preserve individuals freedoms. Democracies
ensure at least individual freedoms, even if it is incapable to ensure social and
economic development.
As we can see, the ideas of development and poverty surround all the dis-
cussion in this work. But we will really focus in analysing the relations between
inequality and democracy. The idea is truly understand if democracy can or can-
not ensure inequality reduction, why it can or why it cannot. If it cannot, is there
any element that can foster equality?

35
Chapter 5 - Relating participation and
inequality

Before starting the studies about the relationship between participation and
inequality in this chapter is important to present the table of summary statistics
for all the variables. This shows the scale of measurement for each variable and
helps to give the readers a more clear idea about the results we will achieve.
Table 1 - Summary statistics for all the variables

We will start this session comparing the Polity IV indicator of Democracy

(formal democracy) to the Gini Index, indicator of income inequality. This com-
parison will be done through regression. The simple regression with Gini Index
as dependent variable and Polity IV Democracy as independent variable give us
the following result:
Table 2 - Regression Gini Index and Polity IV_Democracy

The results show that a variation of 10% in the index of democracy in-
creases inequality in 0,00001%. This is a very inexpressive impact. The regres-
sion was done using 1.049 observations, from 136 countries. We only excluded
countries whose Gini Index is not measured by the World Bank. As we can see
the t-value (0.01) shows a low level of significance and the high p-value (0.989)
confirms it. Hence the parameter is not statistically significant. R-squared value
shows this model doesn’t explain the correlation at all. In order to continue the
analysis, we will suspend the use of the independent variable Polity IV-
36
Democracy and use some variables from the Social Development Indices,
from the International Institute of Social Studies.
As aforementioned, we will use the indicators of Civic activism, Intergroup
Cohesion, Interpersonal Safety and Trust and Inclusion. In these new models
the dependent variable is still the Gini Index.
Table 3 – Regression Gini Index and Civic activism

The simple regression with Gini Index as dependent variable and civic ac-
tivism as independent variable is represented above. It counts on 210 observa-
tions. The coefficient is expressive, while the civic activism increases 10%, the
inequality reduces 3,5%. The t-value (-4.50) demonstrates it is a significant value.
This characteristic is reinforced by the p-value (0.000). The R-squared value
(0.0887) shows that civic activism is weak in explaining inequality. The Adj. R-
squared value (0.0843) reinforces the weakness of explanation. Nonetheless, this
is an indicator that will be very important in our analysis; therefore, we will save
this value in order to add some more variables later. For now, we will continue
analyzing the simple regression. Our next study case will be the intergroup co-
hesion.
Table 4 – Regression Gini Index and Intergroup Cohesion

The simple regression with Gini Index as dependent variable and intergroup
cohesion as independent variable is represented above. It counts on 178 obser-
vations. The coefficient (-0.28) has some expressivity, when the intergroup co-
hesion increases in 10%, the inequality reduces 2,8%. The t-value (-3,74) demon-
strates it is a significant value. This characteristic is reinforced by the p-value
37
(0.000). The R-squared value (0.0735) shows that intergroup cohesion, in a sim-
ple model, is weak in explaining inequality. The Adj. R-squared value (0.0682)
reinforces the weakness of explanation. However, this also counts as an im-
portant variable to be used in multiple variable regressions. When putting civic
activism and intergroup cohesion as two independent variables, we achieve the
following table.
Table 5 – Multiple Regression Gini Index, Intergroup Cohesion, Civic
activism

The multiple regression with Gini Index as dependent variable, intergroup

cohesion and civic activism as independent variables counts on 175 observa-
tions. It doesn’t show any interesting new information. Actually, it only demon-
strates the civic activism’s impact in inequality can be in great part explained by
intergroup cohesion. This can be seen by the decrease in the coefficient from
0.34 in the simple regression to 0.14 in the above mentioned multiple regression.
The R-squared value (0.0789) shows that putting only those two variables
together we still have a poor model to explain inequality. The Adj. R-squared
value (0.0681) reinforces the weakness of this explanation. We will save both
values and continue with the simple regression using other independent varia-
bles. The next one is Inclusion of Minorities.

38
 Table 6 - Regression Gini Index and Inclusion of Minorities

The simple regression with Gini Index as dependent variable and inclusion
as independent variable is represented above. It counts on 166 observations. The
coefficient (-0.31) has some expressivity, when the inclusion increases in 10%
the inequality reduces 3.1%. The t-value (-3.40) demonstrates it is a significant
value. This characteristic is reinforced by the p-value (0.001). The R-squared
value (0.0659) shows a weak capacity to explain inequality, as in the aforemen-
tioned variables. The Adj. R-squared value (0.0602) reinforces it. It is important
to highlight this result is coherent with the common sense, as mentioned in the
explanation of the indicator.
Table 7 – Multiple Regression Gini Index, Intergroup Cohesion, Civic
activism, Inclusion of Minorities

The multiple regression with Gini Index as dependent variable, intergroup

cohesion, civic activism and Inclusion of Minorities as independent variables
counts on 143 observations. It doesn’t show any interesting new information
about Civic activism and Intergroup Cohesion. But it demonstrates that one of
those variables assimilate the impact of inclusion of minorities in inequality. This
can be seen by the decrease in the coefficient from 0.31 in the simple regression
to 0.059 in the above mentioned multiple regression.

39
 The R-squared value (0.0970) shows that putting only those three variables
together we still have a poor model to explain inequality. The Adj. R-squared
value (0.0776) reinforces the weakness of this explanation.
It is important to check which of those variables (civic activism or Inter-
group cohesion) interferes whit inclusion of minorities. Therefore we will run
two multiple regressions using Gini Index as dependent variable, inclusion of
minorities and each of those variables individually.
Table 8 – Multiple Regression Gini Index, Intergroup Cohesion,
Inclusion of Minorities

The multiple regression with Gini Index as dependent variable, intergroup

cohesion and Inclusion of Minorities as independent variables counts on 146
observations. It demonstrates the impact of inclusion of minorities in inequality
can be in great part explained by intergroup cohesion. This can be seen by the
decrease in the coefficient of inclusion of minorities from 0.31 in the simple
regression to 0.11 in the above mentioned multiple regression.
The R-squared value (0.0946) shows that putting only those two variables
together we still have a poor model to explain inequality. The Adj. R-squared
value (0.0819) reinforces the weakness of this explanation.
Table 9 – Multiple Regression Gini Index, Civic activism, Inclusion
of Minorities

40
 The multiple regression with Gini Index as dependent variable, Civic activ-
ism and Inclusion of Minorities as independent variables counts on 163 obser-
vations. It demonstrates that Civic activism explain part of the impact of Inclu-
sion of Minorities in inequality. This can be perceived by the decrease in the
coefficient of inclusion of minorities from 0.31 in the simple regression to 0.18
in the above mentioned multiple regression.
The R-squared value (0.0932) shows that putting only those two variables
together we still have a poor model to explain inequality. The Adj. R-squared
value (0.0819) reinforces the weakness of this explanation. Nonetheless, we will
save those values and continue with the simple regression using other independ-
ent variables. The next one is Interpersonal Safety and Trust.
Table 10 – Multiple Regression Gini Index, Interpersonal Safety and
Trust

The simple regression with Gini Index as dependent variable and interper-
sonal safety and trust as independent variable is represented above. It counts on
193 observations. The coefficient (-0.56) has important expressivity, when the
interpersonal safety and trust increases in 10%, the inequality reduces 5,7%. The
t-value (-9,07) demonstrates it is a significant value. This characteristic is rein-
forced by the p-value (0.000). The R-squared value (0.3011) shows a very inter-
esting capacity to explain inequality. The Adj. R-squared value (0.2975) rein-
forces it.
Before putting all the variables together, we still want to test only the varia-
bles presented in the Social Development Indices in order to test their capacity
to explain inequality.
Table 11 – Multiple Regression Gini Index, Civic activism, Intergroup

41
 Cohesion, Interpersonal Safety and Trust and Inclusion of Minorities

It shows that an increase in 10% of Civic activism would bring an increase

of 3,4% in inequality. The signal multiple regression has inverted the impact of
civic activism. This is probably understood because within civic activism we have
access to civic associations, the means to participate in civic activities but we also
have access to the media. This result shows that part of Civic activism is probably
captured by other variables, as we saw before. The t-value (2.11) points a signif-
icant result and the low p-value (0.037) reinforces its importance.
It also shows that an increase in 10% of Intergroup Cohesion would bring
a reduction of 2% in inequality. The t-value (2.67) points a significant result and
the low p-value (0.008) reinforces its importance.
We saw before that Intergroup Cohesion can happen in multiple levels, it
can happen in a top-down cohesion or it can occur in a bottom-up cohesion.
But when comparing the data, the indicator shows that most of the cohesions
happen to benefit the poor, what is a very interesting finding, despite of the fact
that the impact is relatively small.
Analyzing the next independent variable, we see an increase in 10% of In-
terpersonal Safety and Trust generates a decrease of 6,9% in inequality. The t-
value shows that the significance is high (8.16) and the p-value (0.000) confirms
its importance.
This result is the most important one when considering an isolated variable.
Firstly it is able to explain the major party of the relations. Second it reinforces
the common sense and what we were waiting for before running the regression.
The idea of Leigh that “in places where people trust one another, institutions,
markets and societies seem to work better.” (Leigh 2006:268) is reinforced.
Following the analysis, we see an increasing of 10% in Inclusion increases
inequality in 0,8%. Here it is important to highlight the meaning is not aligned
with the idea that more participation would foster equality. Those results don’t
make sense. Here, we can also find a change in the signal, pointing to some kind
of interference between variables. However, the t-value (0.66) shows this is not
a significant measure and the p-value (0.508) confirms it. This way, when inclu-
sion is part of the multiple regression in which civic activism, intergroup cohe-
sion and interpersonal trust and safety are the other variables it looses its im-
portance. What probably means that the other variables encompass inclusion.
42
 This multiple regression is the most interesting from all the regressions done
so far, because of all the changes it has demonstrated. The first reason is because
the R-squared value (0.3913) reveals this model, using only indicators of the In-
dices of Social Development, is capable of explaining approximately 40% of the
impact in inequality. The Adj. R-squared value (0.3736) reinforces it.
Second, the change in the coefficient of Interpersonal Safety and Trust from
0.57 in the simple regression to 0.69 in the aforementioned multiple variable
regression demonstrates higher importance of Interpersonal Safety and Trust on
correlation to Inequality.
Third, the change on the signal of Inclusion of Minorities make this part of
the equation closer to what we were expecting. The problem about this change
is that Inclusion of Minorities missed significance.
Fourth, the change on the signal of Civic activism generate an initially not
expected situation, that can be understood when focusing in role of the media
as status quo maintainer. Another important aspect is that it decreased Civic
activism significance.
This multiple variable regression showed the Indices of Social Development
is a very important instrument in order to understand the impact of social
changes objectively. But, because the aim of this work is compare the impact of
multiple types of democracy (including Formal Democracy) in inequality, it is
mandatory to put back in the model the Polity IV indices of Democracy, even
considerate that it will reduce the explanatory power of the model. Putting all
the tested independent variables together we have:
Table 12 – Multiple Regression Gini Index, Civic activism, Intergroup
Cohesion, Interpersonal Safety and Trust, Inclusion of Minorities,
Polity IV - Democracy

Thus, with the data and objectives we had, the model that better explains
the relationship between inequality and democracy is composed by the following
independent variables: Civic activism, Intergroup Cohesion, Interpersonal Safety
and Trust, Polity IV Democracy Index, Inclusion of Minorities.

43
 As we were expecting, this model shows intergroup cohesion and interper-
sonal safety and trust have an important impact in reducing income inequality,
2,1% and 6,8% respectively. These values are the same than when Polity IV In-
dicator was not used, pointing to few correlation with the indicator of formal
democracy. At the meantime, civic activism (understood as media liberty and
rule obedience) has contributed to increase inequality. The measure of formal
democracy (Polity IV) does not have significant impact in inequality and the
captured relationship points to a positive (increasing inequality) contribution to
inequality.
As aforementioned, theoretically this increment can be explained by the dif-
ference in de jure power and de facto power. It is important to highlight how-
ever, that if Formal Democracy does not have significant impact in equality,
when substituting Democracy to Autocracy, the result keeps irrelevant, as we
can see in the following graph. This demonstrates that Autocracy is also ineffec-
tive in generating equality, challenging the defenders of this kind of regime.
Table 13 – Multiple Regression Gini Index, Civic activism, Intergroup
Cohesion, Interpersonal Safety and Trust, Inclusion of Minorities,
Polity IV – Autocracy

When talking about autocracy, however, we must highlight that under au-
tocratic regimes, intergroup dialogues cannot properly occur. This means that
Intergroup Cohesion and Interpersonal Safety and Trust would be threatened.
In the introduction of this work, we saw how controversial the use of De-
mocracy is in the political arena. Later we saw that some definitions proposed in
Political Science are useful and count on some interesting indicators. This ap-
parent contradiction induce us to think that the political controversial is not a
problem of unclearness, but a problem of rhetoric. They have incentives to mis-
use the term democracy in order to pretend they are serving their people, while
actually they are serving other interests.
Then we tried to deepen our knowledge about democracy, we have sum-
marized its evolution from the direct democracy from the Greeks passing
through the mix democracy from the Romans, until arrive in the model of rep-

44
resentative democracy we have today. We also deepen the understanding of rep-
resentative democracy, dividing it in liberal democracy, social democracy and
participatory democracy. This division allowed us to deepen the process of elec-
tions that is the most defended characteristic of democracy, mainly in a liberal
perspective.
We saw researchers had some worries about the effectiveness of the liberal
perspective, that later we called Formal Democracy, in effectively represent peo-
ple’s wishes and promote collective gains. Those worries were reinforced in the
quantitative analysis, when the scale of Democracy, taken from the Polity IV
database, showed low influence in reducing the level of inequality in the analyzed
countries.
We had initially a hope that Participatory Democracy would have better in-
fluence in fostering equality than Formal Democracy. The quantitative analysis
proved that impact in a relevant level.
The impact of Civic activism, understood as “social norms, organizations,
and practices which facilitate greater citizen involvement in public policies and
decisions” (International Institute of Social Studies. 2010) and the inclusion of
minorities, understood as “systemic bias in the allocation of public services and
benefits” (International Institute of Social Studies. 2010) were insignificant.
Moreover, as demonstrated in the successive regressions, most part of the
Civic activism, the indicator we were using to express Participatory Democracy,
was incorporated by other variables, generating a situation in which civic activ-
ism was shown as reinforcing inequality when taking together with intergroup
cohesion, interpersonal trust and safety and formal democracy. Nonetheless,
Participatory Democracy has demonstrated to be better to reduce inequality than
Formal Democracy, when both variables were used alone.
Table 14 – Multiple Regression Gini Index, Civic activism, Polity IV-
Democracy

As we can see, it shows that an increase in 10% of Participatory Democracy

(Civic activism) would bring a reduction of 4,2% in inequality. The t-value (-
4.61) points a significant result, while an increase in 10% of Formal Democracy
(Polity IV-Democracy) would bring a rise of 0.3% in inequality, with a poor sig-
nificance (t-value 1.56). Moreover, the impact of each type of Democracy on
inequality can also be evaluated in the aforementioned simple regressions that
45
have exclusively Polity IV-Democracy and Civic activism as independent varia-
bles.
Because we found an important impact of Participatory Democracy on In-
equality, we felt challenged to deepen even more in the correlation between In-
equality and Democracy. In this task, the guidance of the Social Development
Indices was essential. It offered us the opportunity to evaluate internal elements
of Democracy and those internal elements offered a much more expressive ex-
planation about how to reduce inequality.
Among those indicators was Interpersonal trust and safety that demon-
strates a very interesting relationship with the subject. The relationship of Inter-
personal Trust and Inequality demanded a better understanding of psychological
processes that could explain how trust, a personal feeling, could generate reduc-
tion in inequality, a social consequence. The psychological dynamic identified
linked interpersonal trust and safety with intergroup cohesion. The element that
linked both and was identified as the main explanatory variable was the Inter-
group Dialogue. Unfortunately, we didn’t have an indicator of Intergroup Dia-
logue. Because of that, the level of intergroup dialogue could only be inferred.
Schoem has studied the relationship between trust and Democracy about
ten years ago. We used this to support the statement that Interpersonal Trust
could impact inequality in a positive a way. The quantitative analysis demon-
strated with a high level of significance (-6.95) and with a high capacity of expla-
nation (0.3016), that inequality would be reduced in 5.7% when interpersonal
trust and safety were increased in 10%.
The explanation to such a result can be tracked back putting together the
works of Leigh and Schoem. Leigh focus in the effects of trust in the market
and Schoem focus in how the process of trust building can extend engagement
and commitment with the collective well-being.
There is an important element, showed up in some theoretical explanations,
that we were unable to analyse due to the lack of data, the impact of the idea of
social justice on public choice. According to those theories, a more collective
oriented community would make choices that decrease inequality, because it
would take into consideration the necessities of those left behind by the devel-
opment process. If this is true, educating children with collective values would
have a huge impact in inequality. This perspective seems feasible, but it deserves
a more elaborated scrutiny.

46
Chapter 6 - Conclusion

In summary, the regressions gave us the following conclusions:

 Formal Democracy does not ensure reduction in inequality.

 Participatory Democracy has a better performance than Formal Democ-

racy in promoting equality.

 Participatory Democracy creates the context in which Intergroup Dia-

logue can flourish.

 Intergroup Dialogue is an essential element for ensuring intergroup co-

hesion and interpersonal trust.

 Intergroup Cohesion has a significant impact in reducing inequality.

 Among the variables analysed Interpersonal Trust and Safety is the most
important variable to foster inequality reduction.

What does those results tell us about the relationship between development,
poverty and democracy?
Despite of the fact that Formal Democracy does not ensure equality, we can
consider that it is the first step in creating the outline for it. The main element
in this process is the interpersonal trust and safety. And as we have demon-
strated, this element can only be ensured through dialogue. As we saw in Fung
and Wright, “forging political consensus through dialogue” is one of the main
elements of the concept of Democracy.
If we can understand why Democracy is important to reduce inequality,
even without having direct impact over it, we still need to explain how democ-
racy can correlate with poverty. As we saw throughout the paper, poverty and
inequality are two different things. Poverty is a measure of stock, while inequality
a measure of dispersion. This means that eliminating poverty doesn’t mean elim-
inating inequality (once you can have a very unequal society with everybody
above the poverty line) and at the same time eliminating inequality doesn’t mean
eliminating poverty (once everybody can be equally poor).
However, the regressions showed us the process of intergroup cohesion as
one of the elements that promote equality. Because we are in a democratic con-
text, it is possible to assume that this choice (decreasing inequality) is being made
in a conscious manner. If this assumption is true, it is very difficult to imagine
that a society will consciously choose to make everybody equally poor.
This is exactly the point in which the difference between an autocracy and
a democracy is clearer. While in an autocracy it is possible to imagine a dictator
condemning all his people to an equal level of poverty (Cuba and North Korea
as good examples), it is very difficult to imagine a democracy where this occurs.
We have examples of democracies where the level of inequality is very high
(some people are very rich and the majority is very poor), but I don’t know any
democracy where people are equal and at the same time poor.
47
 Based in those arguments I believe the assumption of conscious choice is
feasible and, therefore, in a democratic context we can extend the impact in in-
equality to poverty. In other words, the reduction of inequality in democracies
would necessarily generate reduction of poverty. This conclusion is aligned with
the aforementioned statement of Foster et al according to who “inequality and
poverty often move together” (Foster et al. 2013:3).
Now that we can understand the impact of democracy in inequality and
poverty, we must understand the relationship between democracy and develop-
ment. Because we have already correlated democracy and poverty, the extension
to development is almost straightforward. Because the concepts of development
that we have presented in this work take poverty alleviation as one of its main
characteristics, we can say that decrease or eliminate poverty is generate devel-
opment.
If we recover the liberal concept of development adopted by Bigsten and
Levin we will remember they defend that the most essential element of develop-
ment initiatives is to reduce poverty. At the same time, if we prefer to recover
Sen’s perspective we will understand development as freedom and poverty as
the lack of freedom to choose. In both cases, the relationship between poverty
and development is straightforward.
In conclusion, we argue that Formal Democracy do not ensure develop-
ment, while Participatory Democracy does. Moreover, due to its intrinsic value
in allowing people to freely manifest their preferences and due to its contribution
in creating an environment open to the dialogue, democracy is much more pro-
ductive than an autocracy in promoting the conditionalities (intergroup cohesion
and interpersonal safety and trust) essentials to development.

48
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